Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
ORDER
Per N. K. Saini, AM:
This is an appeal by the assessee against the order dated 28.02.2013 of ld. CIT(A)-XVII, New Delhi.
Following grounds have been raised in this appeal:
“1. That the order is against the law and facts of the case. 2. That the learned Commissioner of Income Tax (Appeals) is not justified in confirming the action of the Assessing Officer in adding the contribution of Rs.431,43,00,000/- towards pension fund to the value of Fringe Benefit. It is prayed that the 2 Punjab National Bank additions of Rs.431,43,00,000/- being unwarranted be deleted. 3. That the Learned Commissioner of Income Tax (Appeals) was not justified in confirming the action of the Assessing Officer in making the addition of Rs.164,73,00,000/- in respect of the pensioners to the value of Fringe Benefit Tax. 4. That the above grounds of appeal are independent and without prejudice to one and another.”
3. During the course of hearing the ld. Counsel for the assessee at the very outset stated the an identical issue having similar facts has already been adjudicated by this Bench of the Tribunal in assessee’s own case in 1826/Del/2011 and 4254/Del/2011 for the assessment years 2006-07 to 2008-09 respectively vide order dated 15.06.2016 (copy of the said order was furnished which is placed on record). The aforesaid contention of the ld. Counsel for the assessee was not controverted by the ld. CIT DR.
After considering the submissions of both the parties and the material available on record, it is noticed that an identical issue having similar facts has already been adjudicated by this Bench of the Tribunal vide order dated 15.06.2016 wherein the 3 Punjab National Bank relevant findings have been given in paras 14 to 21 which read as under:
“14. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee is a schedule bank governed by the provisions of the Banking Regulation Act, 1949 and made the contribution towards Pension Funds of the employees. The said contribution by the assessee as an employer was brought to tax as eligible fringe benefit tax value during the year by the AO. The contention of the assessee before the ld. CIT(A) was that the contribution to Pension Fund was made in lieu of Provident Fund, it was statutory liability and since the contribution of provident fund was not considered for valuation of Fringe Benefit Tax, the contribution to pension fund also did not attract the provisions of fringe benefit tax. The said contention of the assessee was not accepted by the ld. CIT(A) who upheld the action of the AO. To resolve of present controversy it is relevant to discuss the provisions contained in section 115WB(1)(c) of the Act which reads as under :- “115WB (1) – For the purpose of this Chapter “fringe benefits” means any consideration for employment provided by way of – (a) – (b) – (c) Any contribution by the employer to an approved superannuation fund for employees.”
4 Punjab National Bank 15. On a similar issue, a co-ordinate bench of the I.T.A.T i.e. Hyderabad Benches “A”, Hyderabad, analysed the various amendments and definitions relevant for the aforesaid section, in the case of Andhra Bank, Hyderabad vs. DCIT 1(1) Hyderabad (Supra) which read as under :- “ 9.1. As amended by Finance Act, 2006 – “115WC.(1) For the purpose of this Chapter, the value of fringe benefits shall be the aggregate of the following namely : -- (a) -- ---- -- (b) The amount of contribution referred to in clause (c) of sub-section(1) of section 115WB which exceeds one lakh rupees in respect of each employee; Extract of Section 17(2) as amended by Finance (No.2) Act, 2009. “Salary”, “perquisite” and “profits in lieu of salary” defined.
17. For the purposes of sections 15 and 16 and of this section, - (1) “salary” includes – . . . . . . . . (2) “perquisite” includes – (vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and 5 Punjab National Bank 9.2. Contribution as defined in Part-A of Fourth Schedule in Cluase-2 is as under: “2. In this Part, unless the context otherwise requires,- (i) “employer” means………; (a) “employee” means………; (b) “contribution” means any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own moneys, to the individual account of an employee, but does not include any sum credited as interest; PART-B Definitions : 1. In this Part, unless the context otherwise requires, “employer”, “employee”, “contribution” and “salary” have, in relation to superannuation funds, the meanings assigned to those expressions in Rule 2 of Part A in relation to provident funds.” 9.3 Accordingly, the ‘contribution’ as defined in the provision means any sum credited to the individual account. Rationalizing the provision of fringe benefit tax the memorandum explaining the Finance Bill 2006 has clarified as under: “It is proposed to amend the said clause (b) so as to provide that contribution by an employer to an approved superannuation fund to the extent it does not exceed rupees one lakh per employee in respect of whom contribution is made, shall not be liable to fringe benefit tax. For example, 6 Punjab National Bank consider an employer who has three employees: A, B and C and he makes contribution to their account in the approved superannuation fund in the following manner: Employee Contribution to approved superannuation fund by the employer. A Rs. 50,000 B Rs. 90,000 C Rs. 2,00,000 In case of employees A and B, the value of fringe benefits shall be taken to be nil since contributions by the employer in respect of these employees does not exceed Rs. 1,00,000/- in each case. However, in the case of employee C the value of fringe benefit shall be Rs. 1,00,000/- (Rs. 2,00,000-1,00,000/-) for the purposes of levy of fringe benefit tax”. 9.4. There was another amendment in Finance (No.2) Bill 2009 wherein it was clarified as under: “It is proposed to insert a new section 115WM to abolish the fringe benefit tax. Consequently, it is also proposed to restore the taxation of the fringe benefits as perquisites in the hands of the employees. Therefore, it is also proposed to amend clause (2) of section 17, - (a) By substituting sub-clause (vi) so as to provide that perquisite shall include the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional 7 Punjab National Bank rate to the assessee. For this purpose, the value of any specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares. The “fair market value” will mean the value determined in accordance with the method as may be prescribed by the Board. (b) By inserting sub-clause (vii) to provide that perquisite shall also include the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees. (c) By inserting sub-clause (vii) to provide that perquisite shall also include the value of any other fringe benefit or amenity as may be prescribed”.
From the aforesaid series of amendments and clarification it can be said that any amount which is contributed to an individual account of an employee to the extent of Rs. One lakh is excluded from the purview of Fringe Benefit Tax from assessment year 2007-08.
On a similar issue, the coordinate bench of the ITAT Hyderabad vide order dated 16.7.2014, in the case of Andra Bank Hyderabad vs. DCIT Circle 1 (1) Hyderabad (Supra) referred to the decision of the coordinate bench dated 27.11.2009 in the case of Rajasthan Rajya Vidyut Prasaran Nigam Ltd., which analysed this issue and held as under :-
8 Punjab National Bank “The above principle of interpretation laid down in various judgments of Hon’ble Supreme Court when read in context with the purpose and intention for which the amendment was made u/s 115WB(1)(c) leaves no scope of debate that the said amendment was to remedy the unintended consequences and therefore, it is required to be considered as retrospective in operation so that a reasonable interpretation can be given to the scheme of levy of fringe benefit tax on contribution to superannuation fund as a whole. We, therefore, hold that the contribution to superannuation fund in present case being less than Rs.1.00 lac per employee, is not liable for fringe benefit tax. In the result, this ground of assessee is allowed.”
From the above said discussion, it is clear that the provisions u/s 115WB(1)(c) are held to be applicable for the assessment year under consideration i.e. the assessment year 2006-07. It is also not in dispute that “Bank Employees Pension Schemes” was introduced in lieu of “contributory provident fund” at the option of employees and accordingly a settlement was signed between Indian Banks Associations represented by 52 member banks which included the assessee bank and representatives of workmen unions introducing a pension scheme in the Banking Industry and in terms of the settlement, an employee in service as on 1.11.1993 was to exercise his option to switch over to the “Pension Scheme” from the “Provident Fund Scheme”, upon which the amount of CPF ( banks’ contribution) outstanding in his Provident Fund account would be transferred to the Pension Fund of 9 Punjab National Bank the bank. Thus, the “Pension Scheme” introduced by banks was in lieu of the statutory “Provident Fund Scheme”. The aforesaid settlement dated 1.11.1993 was later on made into scheme and 29th notified on September, 1995 as “Bank Employee’s Pension Regulations”, which is a subordinate regulation having been framed by the Banks Boards under Section 19(1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. The Pension Fund Scheme, therefore, has a statutory character and after obtaining the necessary ‘no objection’ from the Income-tax Authorities, the banks which were parties to the settlement dated 29.1.1993 had set up pension funds and the contribution made into such funds are as laid down in the scheme and constitutes among other things the following: “(i)the contribution by the bank at the rate of 10% per month on the pay of the employee, which contribution was hitherto being made to the PF account. (ii) The accumulated contributions of the bank to the Provident Fund and interest accrued thereon up to the date of such transfer in respect of the employee; (iii) Additional annual contribution to the Fund as required to secure payment of pensionary benefits to the members of the Fund, based on actuarial investigation of the Fund as at 31st March of every financial year.”
10 Punjab National Bank 19. In the present case, nothing is brought on record to substantiate that the contribution in the Pension Fund of the assessee bank was over and above the contributions to gratuity and provident fund. Moreover, in the absence of the Pension Scheme, the assessee would have continued to contribute the stipulate amount to the Provident Fund account of the employees and such stipulated contributions would not have attracted fringe benefit tax. In our opinion, the contributions made by the assessee bank to the “Pension Fund Scheme” is only to secure pension payments which is its statutory obligation. Therefore, the assessee bank has established a superannuation Scheme for the purpose of providing pension to its eligible employees. In the present case, the assessee bank made a contribution of Rs. 471.42 crores to the Pension Fund for all its employees who were governed by the “Pension Fund Scheme” taken together based on the actuarial valuation provided by the Actuarial Valuer appointed by the bank.
An identical issue has been adjudicated by the ITAT Hyderabad Benches A, Hyderabad in for the assessment year 2006- 07 in the case of Andhra Bank Hyderabad vs. DCIT Circle 1 (1) Hyderabad and the relevant findings have been given in para 11.1 to 13 of the order dated 16th July 2014 which read as under:- 11.1. In the present case, assessee made a single contribution during the year to the superannuation fund for all its employees who were governed by this scheme taken together based on the actuarial valuation provided by the Actuarial Valuer. There is no dispute with reference to the fact that the amount 11 Punjab National Bank of Rs.75,25,49,000/- was provided as short fall to the fund from making pension payable to eligible employees and this amount was arrived at on the basis of valuation of Actuarial Valuer appointed by the Bank. In respect of such single contribution made under defined benefit scheme, the details of contribution pertaining to each employee are not available in the Actuarial Valuation Report, since the amount is lump sum amount calculated based on the Actuarial Valuation having several underlying assumptions. The same is evident from the Actuarial Valuation Report issued. 11.2. It was explained that there could be a scenario where the assets of the Scheme may be in surplus over its obligations, as per the actuarial valuation, due to various factors viz. reduction in the number of employees on the payroll of the assessee on the last day of the financial year visa- vis first day of that year, etc. Accordingly, the assessee may not be required to contribute for that particular year. Likewise, in subsequent year, there could be a scenario where the obligations/liabilities of the Scheme as per the actuarial valuation are higher than its assets and hence, assessee bank would be required to contribute to the Scheme in that particular year. 11.3. The actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the enterprise. If actuarial or investment experiences are worse than expected, the employer's obligation may increase. In view of the above, it is apparent that the contribution paid by the assessee bank is mainly made up of two components, firstly to meet the cost of the accruing benefits during the year and secondly, an adjustment for any deficit or surplus in the scheme at the time for the past year(s).
12 Punjab National Bank Accordingly, in view of the above arguments and given the nature of the 'Defined Benefit Scheme', it is not possible to derive the contribution on a per employees basis which may be used for income tax purposes.
In the case of Royal Bank of Scotland Inre, 45 Taxman.com 283, the Authority for Advanced Rulings has analysed the defined benefit scheme and held that in the defined benefit scheme employer’s contribution to the superannuation fund assures only future benefit to employees and they did not get any vested right at the time of making contribution to the fund. In the context of analyzing the tax deducted at source provisions, it was held that such contribution need not be treated as chargeable perquisite in the hands of employee until they are entitled to receive it. The Hon’ble AAR followed the principles laid down by Hon’ble Delhi Court in the case of Yoshio Kubo vs. CIT (2013) 36 taxmann.com 1 (Del.) wherein it was held out that when an amount does not result in a direct present benefit to the employee who does not enjoy it but assures him a future benefit in the event of contingency, the payment made by the employer does not vest in the employee. In view of the above principles laid down by the Hon’ble Delhi Court as well as the advice given by Authority for Advanced Rulings which, in turn, followed the Hon’ble Supreme Court decision in the case of CIT vs. L.W. Russel (1964) 53 ITR 91 (SC), the amount paid during the year cannot be considered as a contribution to superannuation fund as contemplated under the provisions of section 115WB(1)(c). 12.1. In view of the above, since the amount is not paid to the benefit of any individual employee, the lump sum contribution made under the defined benefit scheme, in our opinion, does not attract 13 Punjab National Bank provisions of 115WB(1)(c). As per the definition of ‘contribution’, no individual employee had any benefit earmarked, the payment cannot be considered as covered by the provisions of 115WB(1)(c).
As briefly stated earlier, the Ld. CIT(A) followed the Coordinate Bench decision in giving benefit of amendment brought in later year to the year under consideration. It was submitted that the order of the Ld. CIT(A) could not be implemented as benefit of employee could not be ascertained in view of the scheme of the benefit fund and accordingly, even though average contribution to each of the employees covered by the scheme is less than Rs. 1 lakh, A.O./assessee could not furnish any information about individual employee’s benefit. However, this issue becomes academic in nature as we have already held that contribution made to the fund under this benefit scheme cannot be considered as the amount to be considered under the provisions of section 115WB(1)(c) for the purpose of FBT. In view of this, assessee’s grounds are allowed.”
Since the facts of the present case are similar to the facts involved in the aforesaid referred to case of Andhra Bank, Hyderabad vs. DCIT Circle 1, (1) Hyderabad in for the assessment year 2006-07. We, therefore, by respectfully following the aforesaid order of the Coordinate Bench on an identical issue, set aside the impugned order and direct the AO to allow the claim of the assessee and not to consider the impugned contribution of the assessee to the “Pension Fund” as a Fringe Benefit provided by the assessee to its employees. During the course of hearing, no other decision was brought to our notice. Similar issue is involved in ITA Nos. 1826 14 Punjab National Bank and 4254/Del/2011 for the assessment years 2007- 08 and 2008-09, therefore, our findings given in the former part of this order in respect of ITA No. 4493/Del/2009 for the assessment year 2006-07 shall apply mutatis mutandis.”
So, respectfully following the aforesaid referred to order dated 15.06.2016 in assessee’s own case in ITA Nos. 4493/Del/2009, 1826/Del/2011 and 4254/Del/2011, we set aside the impugned order passed by the ld. CIT(A) and the issues raised by the assessee are allowed in its favour.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 21/09/2016)